Input Service Distributor

SECTION : Input Service Distributor

  • Lesson Objectives

    On completion of this lesson, you will be able to understand:

    ·        Meaning of Input Service Distributor

    ·        Conditions for Input Tax Distribution

    ·         Legal Formalities for an ISD

    ·         Documentation required for ISD

    ·         Distribution of SGST, CGST and IGST



    Please go through the First Video of the Chapter 11.

     Input Service Distributor (ISD)

    ISD means an office of the Taxable Person who receives invoices for services used by its branches. Then it distributes the tax paid, to such branches proportionately by issuing an ISD invoice.


    The branches will have same PAN but different GSTINs.



    The Registered / Head Office of a Company is at New Delhi. Other Offices of the Company are at Chennai, Bangalore and Mumbai. Company incurred annual software maintenance expenses (service received) on behalf of all its branches and received the invoice for the same. Invoice is received at New Delhi Office.


    Since the software is used at all the four locations, the input tax credit of entire services cannot be claimed at New Delhi. The same has to be distributed to all the four locations. The Delhi Corporate office has to act as ISD to distribute the Input Tax credit.


    Conditions/restrictions for distribution of credit


    The distribution of credit would be done subject to the following conditions:

    a. Credit should be distributed through tax invoice or other document as prescribed;

    b. Amount of credit distributed should not exceed the amount of credit available;

    c. Credit should be distributed only to such suppliers to whom such services are attributable;

    d. Credit in respect of services attributable to more than one supplier should be distributed proportionately on the basis of turnover of respective supplier during the preceding financial year.


    Distribution of common credit among the units of an ISD

    The common credit used by all the units can be distributed by ISD on pro rata basis i.e. based on the turnover of each unit to the aggregate turnover of all the units to which credit is distributed.


    Requirements for registration as ISD

    An ISD is required to obtain registration as a deemed supplier of services. The threshold limit of registration is not applicable to ISD.


    The registration of ISD under the existing regime (i.e. under Service Tax) would not be migrated in GST regime. All the existing ISDs will be required to obtain fresh registrations under new regime in case they want to operate as an ISD.


    Multiple Input Service Distributors

    Yes, different offices like marketing division, security division etc. may apply for separate ISD. Like Security Division, Marketing Division, Purchase Department etc.


    Documents for Distribution of Credit

    Input Service distributor can distribute the amount of tax credit to recipients as earlier stated by issuing an ISD invoice.


    The document under which the credit can be distributed is yet to be prescribed. The Act provides that the credit can be distributed only through prescribed document.


    He is required to file Monthly Return by 13th of the following month in form GSTR-6.


    ·        The recipient of the tax credit can view the tax credit so distributed by ISD in GSTR-2A  that is auto-populated and in turn, can claim the same by filing GSTR-2.

    ·        An ISD need not file annual returns as ISD.


    Recovery of excess/ wrongly distributed credit by ISD

    GST Law provide for recovery of excess/wrongly distributed credit by initiating action against the ISD itself or against the recipient of credit so distributed under the GST Law.


    The credit distributed in contravention of provisions of Act could be recovered from the unit to which it is distributed along with interest.

    Recovery procedure for wrongful distribution of credit by ISD

    GST Act provides that the following shall be deemed to be inappropriate distribution of tax credit by Input Service Distributor:

    • Credit distributed to all or any recipient in excess of the amount available for distribution
    • Distributed in an inappropriate ratio to all or any recipient
    • Distributed in excess to what a supplier is entitled to.

    It shall be recovered from such recipient(s) along with interest and the provisions of ‘Demand and Recovery’ shall apply for affecting such recovery.


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